An unnamed Nevada business is in line for a substantial refund after overpaying its sales and use taxes to the state— a refund that could open up budget holes for local governments across the county.

The business, which hasn't yet been identified by the Nevada Department of Taxation, may receive a $27 million refund after state tax auditors confirmed it paid taxes to Nevada that were owed to other states, according to a memo to the Reno City Council. The Nevada Tax Commission will decide whether to approve the refund and how it should be paid to the business at a meeting in December.

If the refund is granted, local governments in Washoe County are expected to foot an $8.7 million share of the refund. The city of Reno's share is estimated to be $2.7 million. Washoe County could owe $4.6 million and the city of Sparks could owe $1.4 million.

According to the memo written by Reno Finance Director Jill Olsen, the state is trying to work out a one- to three-year payment plan for the refund, so the money won't be owed in a lump sum.

The refund will come out of sales and use tax revenue distributed by the state to the county and cities, meaning the local governments will receive less revenue than expected for the last fiscal year, as well as the current fiscal year.

The city of Reno anticipates its contingency funds will be able to handle an expected $900,000 shortfall for this fiscal year.

"Staff estimates that we have sufficient fund balance to cover this loss in revenue," Olsen wrote.

City Manager Sabra Newby said she doesn't anticipated having to make cuts to the approved budget at this point.

But the shortfall follows a decision by the Reno City Council to drastically reduce both its ending fund balance and its contingency fund— two key savings accounts that will help the city cover the refund payments. That means the city will have even less of a cushion for unexpected expenses going forward.

Olsen said in the memo she hopes that sales and use tax revenue will come in at higher levels than forecasted, which would help close that $900,000 hole.

Washoe County budget managers haven't yet figured out how the potential refund will affect their coffers.

"The impact on the county’s budget is not specifically known at this time as the county will be requesting to make the repayment over time for a three-year period," said Assistant County Manager Christine Vuletich.

Neither Reno nor the county said they know the name of the business. The executive director of the Nevada Department of Taxation did not immediately respond to requests for comment.